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AGNC Investment Corp. Announces Third Quarter 2023 Financial Results

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AGNC Investment Corp. (AGNC) reported a comprehensive loss per common share of $(1.02) for the third quarter of 2023. The net spread and dollar roll income per common share was $0.65, excluding estimated 'catch-up' premium amortization benefit. The tangible net book value per common share decreased by $(1.31) or -14.0% from the previous quarter. The company declared dividends of $0.36 per common share, representing a -10.1% economic return on tangible common equity.
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BETHESDA, Md., Oct. 30, 2023 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today announced financial results for the quarter ended September 30, 2023.

THIRD QUARTER 2023 FINANCIAL HIGHLIGHTS

  • $(1.02) comprehensive loss per common share, comprised of:
    • $(0.68) net loss per common share
    • $(0.34) other comprehensive loss ("OCI") per common share on investments marked-to-market through OCI
  • $0.65 net spread and dollar roll income per common share, excluding estimated "catch-up" premium amortization benefit 1
    • Includes less than $0.01 per common share of dollar roll income associated with the Company's $7.3 billion average net long position in Agency mortgage-backed securities ("MBS") in the "to-be-announced" ("TBA") market
    • Excludes $0.05 per common share of estimated "catch-up" premium amortization benefit due to change in projected constant prepayment rate ("CPR") estimates
  • $8.08 tangible net book value per common share as of September 30, 2023
    • Decreased $(1.31) per common share, or -14.0%, from $9.39 per common share as of June 30, 2023
  • $0.36 dividends declared per common share for the third quarter
  • -10.1% economic return on tangible common equity for the quarter
    • Comprised of $0.36 dividends per common share and $(1.31) decrease in tangible net book value per common share

OTHER THIRD QUARTER HIGHLIGHTS

  • $59.3 billion investment portfolio as of September 30, 2023, comprised of:
    • $55.9 billion Agency MBS
    • $2.4 billion net TBA mortgage position
    • $1.1 billion credit risk transfer ("CRT") and non-Agency securities and other mortgage credit investments
  • 7.9x tangible net book value "at risk" leverage as of September 30, 2023
    • 7.5x average tangible net book value "at risk" leverage for the quarter
  • Unencumbered cash and Agency MBS totaled $3.6 billion as of September 30, 2023
    • Excludes unencumbered CRT and non-Agency securities
    • Represents 52% of the Company's tangible equity as of September 30, 2023
  • 8.3% average projected portfolio life CPR as of September 30, 2023
    • 7.1% actual portfolio CPR for the quarter
  • 3.03% annualized net interest spread and TBA dollar roll income for the quarter, excluding estimated "catch-up" premium amortization benefit
    • Excludes 20 bps of "catch-up" premium amortization benefit due to change in projected CPR estimates
  • Capital markets activity
    • Issued 44.7 million common shares through At-the-Market ("ATM") Offerings at an average offering price of $9.67 per share, net of offering costs, or $432 million

___________

1. Represents a non-GAAP measure. Please refer to a reconciliation to the most comparable GAAP measure and additional information regarding the use of non-GAAP financial information later in this release.

 

MANAGEMENT REMARKS
"A complex set of domestic and global factors, including heightened geopolitical risks, Treasury supply concerns, and an approaching inflection point in the Federal Reserve's monetary policy, drove the significant volatility and underperformance in the Treasury and other fixed income markets," said Peter Federico, the Company's President and Chief Executive Officer. "In environments in which Treasury securities experience considerable price instability and the market struggles to find a new equilibrium, Agency MBS typically underperform, which was indeed the case in the third quarter. As challenging as this period has been for all bond market participants, the current opportunity for both levered and unlevered investments in Agency MBS remains historically attractive on both an absolute and relative basis. Once the uncertainties associated with the current market environment subside, we believe that a durable and attractive investment environment will emerge."

"In the third quarter, AGNC generated $0.65 per common share of net spread and dollar roll income, excluding 'catch-up' premium amortization," said Bernice Bell, the Company's Executive Vice President and Chief Financial Officer. "AGNC's economic return for the quarter was -10.1%, comprised of $0.36 of dividends per common share and a $(1.31) decline in tangible net book value per common share as a result of the significant mortgage spread widening during the quarter. Despite the decline in book value, AGNC's "at risk" leverage as of September 30, 2023 was 7.9x, and AGNC's liquidity throughout the quarter remained in line with typical operating parameters. During the quarter, AGNC also raised over $430 million through accretive equity raises under its at-the-market offering program."

TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of September 30, 2023, the Company's tangible net book value per common share was $8.08 per share, a decrease of -14.0% for the quarter compared to $9.39 per share as of June 30, 2023. The Company's tangible net book value per common share excludes $526 million, or $0.81 and $0.87 per share, of goodwill as of September 30, 2023 and June 30, 2023, respectively.

INVESTMENT PORTFOLIO
As of September 30, 2023, the Company's investment portfolio totaled $59.3 billion, comprised of:

  • $58.3 billion of Agency MBS and TBA securities, including:
    • $57.8 billion of fixed-rate securities, comprised of:
      • $53.3 billion 30-year MBS,
      • $2.3 billion 30-year TBA securities, net,
      • $0.9 billion 15-year MBS,
      • $0.1 billion 15-year TBA securities, and
      • $1.2 billion 20-year MBS; and
    • $0.5 billion of collateralized mortgage obligations ("CMOs"), adjustable-rate and other Agency securities; and
  • $1.1 billion of CRT and non-Agency securities and other mortgage credit investments.

As of September 30, 2023, 30-year and 15-year fixed-rate Agency MBS and TBA securities represented 94% and 2%, respectively, of the Company's investment portfolio, compared to 92% and 3%, respectively, as of June 30, 2023.

As of September 30, 2023, the Company's fixed-rate Agency MBS and TBA securities' weighted average coupon was 4.71%, compared to 4.42% as of June 30, 2023, comprised of the following weighted average coupons:

  • 4.79% for 30-year fixed-rate securities;
  • 3.45% for 15-year fixed rate securities; and
  • 2.50% for 20-year fixed-rate securities.

The Company accounts for TBA securities and other forward settling securities as derivative instruments and recognizes TBA dollar roll income in other gain (loss), net on the Company's financial statements. As of September 30, 2023, such positions had a fair value of $2.4 billion and a GAAP net carrying value of $(31) million reported in derivative assets/(liabilities) on the Company's balance sheet, compared to $10.2 billion and $(92) million, respectively, as of June 30, 2023.

CONSTANT PREPAYMENT RATES
The Company's weighted average projected CPR for the remaining life of its Agency securities held as of September 30, 2023 decreased to 8.3% from 9.8% as of June 30, 2023. The Company's weighted average CPR for the third quarter was 7.1%, compared to 6.6% for the prior quarter.

The weighted average cost basis of the Company's investment portfolio was 101.8% of par value as of September 30, 2023. The Company's investment portfolio generated net premium amortization cost of $(20) million, or $(0.03) per common share, for the third quarter, which includes a "catch-up" premium amortization benefit of $31 million, or $0.05 per common share, due to a decrease in the Company's CPR projections for certain securities acquired prior to the third quarter. This compares to net premium amortization cost for the prior quarter of $(45) million, or $(0.08) per common share, including a "catch-up" premium amortization benefit of $11 million, or $0.02 per common share.

ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD 
The Company's average asset yield on its investment portfolio, excluding the TBA position, was 4.26% for the third quarter, compared to 3.72% for the prior quarter. Excluding "catch-up" premium amortization, the Company's average asset yield was 4.04% for the third quarter, compared to 3.63% for the prior quarter. Including the TBA position and excluding "catch-up" premium amortization, the Company's average asset yield for the third quarter was 4.20%, compared to 3.89% for the prior quarter.

For the third quarter, the weighted average interest rate on the Company's repurchase agreements was 5.37%, compared to 5.01% for the prior quarter. For the third quarter, the Company's TBA position had an implied financing cost of 5.28%, compared to 4.89% for the prior quarter. Inclusive of interest rate swaps, the Company's combined weighted average cost of funds for the third quarter was 1.17%, compared to 0.63% for the prior quarter.

The Company's annualized net interest spread, including the TBA position and interest rate swaps and excluding "catch-up" premium amortization, for the third quarter was 3.03%, compared to 3.26% for the prior quarter.

NET SPREAD AND DOLLAR ROLL INCOME
The Company recognized net spread and dollar roll income (a non-GAAP financial measure) for the third quarter of $0.65 per common share, excluding $0.05 per common share of "catch-up" premium amortization benefit, compared to $0.67 per common share for the prior quarter, excluding $0.02 per common share of "catch-up" premium amortization benefit.

A reconciliation of the Company's total comprehensive income (loss) to net spread and dollar roll income, excluding "catch-up" premium amortization, and additional information regarding the Company's use of non-GAAP measures are included later in this release.

LEVERAGE
As of September 30, 2023, $51.9 billion of repurchase agreements, $2.4 billion of net TBA dollar roll positions (at cost) and $0.1 billion of other debt were used to fund the Company's investment portfolio. The remainder, or approximately $0.3 billion, of the Company's repurchase agreements was used to fund short-term purchases of U.S. Treasury securities ("U.S. Treasury repo") and is not included in the Company's leverage measurements. Inclusive of its TBA position and net payable/(receivable) for unsettled investment securities, the Company's tangible net book value "at risk" leverage ratio was 7.9x as of September 30, 2023, compared to 7.2x June 30, 2023. The Company's average "at risk" leverage for the third quarter was 7.5x tangible net book value, compared to 7.2x for the prior quarter.

As of September 30, 2023, the Company's repurchase agreements used to fund its investment portfolio ("Investment Securities Repo") had a weighted average interest rate of 5.47%, compared to 5.23% as of June 30, 2023, and a weighted average remaining maturity of 16 days, compared to 15 days as of June 30, 2023. As of September 30, 2023, $24.1 billion, or 46%, of the Company's Investment Securities Repo was funded through the Company's captive broker-dealer subsidiary, Bethesda Securities, LLC.

As of September 30, 2023, the Company's Investment Securities Repo had remaining maturities of:

  • $51.7 billion of three months or less and
  • $0.2 billion from three to six months.

HEDGING ACTIVITIES 
As of September 30, 2023, interest rate swaps, swaptions, U.S. Treasury positions and other interest rate hedges equaled 116% of the Company's outstanding balance of Investment Securities Repo, TBA position and other debt, compared to 119% as of June 30, 2023.

As of September 30, 2023, the Company's net interest rate swap position totaled $44.4 billion in notional amount, compared to $47.7 billion as of June 30, 2023. As of September 30, 2023, the Company's interest rate swap portfolio had an average fixed pay rate of 0.74%, an average receive rate of 5.30% and an average maturity of 3.5 years, compared to 0.55%, 5.08% and 3.1 years, respectively, as of June 30, 2023. As of September 30, 2023, 80% and 20% of the Company's interest rate swap portfolio were linked to the Secured Overnight Financing Rate ("SOFR") and Overnight Index Swap Rate ("OIS"), respectively.

As of September 30, 2023, the Company had payer swaptions totaling $1.4 billion, a two-year swap equivalent long SOFR futures position of $1.1 billion and a net short U.S. Treasury position of $18.6 billion outstanding, compared to $1.6 billion, $1.3 billion and $13.2 billion, respectively, as of June 30, 2023.

OTHER GAIN (LOSS), NET
For the third quarter, the Company recorded a net loss of $(316) million in other gain (loss), net, or $(0.51) per common share, compared to a net gain of $378 million, or $0.63 per common share, for the prior quarter. Other gain (loss), net for the third quarter was comprised of:

  • $(534) million of net realized losses on sales of investment securities;
  • $(1,356) million of net unrealized losses on investment securities measured at fair value through net income;
  • $583 million of interest rate swap periodic income;
  • $170 million of net gains on interest rate swaps;
  • $89 million of net gains on interest rate swaptions;
  • $(6) million of net losses on SOFR futures;
  • $929 million of net gains on U.S. Treasury positions;
  • $73 thousand of TBA dollar roll income;
  • $(148) million of net mark-to-market losses on TBA securities;
  • $(42) million of other interest income (expense), net; and
  • $(1) million of other miscellaneous losses.

OTHER COMPREHENSIVE LOSS
During the third quarter, the Company recorded other comprehensive loss of $(213) million, or $(0.34) per common share, consisting of net unrealized losses on the Company's Agency securities recognized through OCI, compared to $(65) million, or $(0.11) per common share, of other comprehensive loss for the prior quarter.

COMMON STOCK DIVIDENDS
During the third quarter, the Company declared dividends of $0.12 per share to common stockholders of record as of July 31, August 31, and September 29, 2023, totaling $0.36 per share for the quarter. Since its May 2008 initial public offering through the third quarter of 2023, the Company has declared a total of $12.6 billion in common stock dividends, or $46.84 per common share.

FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO STATISTICS
The following measures of operating performance include net spread and dollar roll income; net spread and dollar roll income, excluding "catch-up" premium amortization; economic interest income; economic interest expense; and the related per common share measures and financial metrics derived from such information, which are non-GAAP financial measures. Please refer to "Use of Non-GAAP Financial Information" later in this release for further discussion of non-GAAP measures.

 

AGNC INVESTMENT CORP.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)












September 30,
2023


June 30,
2023


March 31,
2023


December 31,
2022


September 30,
2022


(unaudited)


(unaudited)


(unaudited)




(unaudited)

Assets:










Agency securities, at fair value (including pledged securities of
$52,250, $41,185, $41,852, $35,800 and $37,886, respectively)

$              55,758


$              46,572


$              44,925


$              39,346


$              41,740

Agency securities transferred to consolidated variable interest
entities, at fair value (pledged securities)

120


131


140


144


149

Credit risk transfer securities, at fair value (including pledged
securities of $709, $664, $747, $703 and $815, respectively)

736


711


769


757


860

Non-Agency securities, at fair value, and other mortgage credit
investments (including pledged securities of $253, $283, $457, $605
and $775, respectively)

353


353


530


682


869

U.S. Treasury securities, at fair value (including pledged securities of
$246, $1,523, $6,481, $353 and $1,213, respectively)

246


1,523


6,642


353


1,213

Cash and cash equivalents

493


716


975


1,018


976

Restricted cash

1,389


907


1,864


1,316


2,186

Derivative assets, at fair value

413


234


229


617


851

Receivable for investment securities sold (including pledged
securities of $273, $148, $339, $119 and $1,163, respectively)

311


148


346


120


1,169

Receivable under reverse repurchase agreements

8,900


7,990


8,929


6,622


7,577

Goodwill

526


526


526


526


526

Other assets

746


707


236


247


408

Total assets

$              69,991


$              60,518


$              66,111


$              51,748


$              58,524

Liabilities:










Repurchase agreements

$              52,107


$              42,029


$              48,384


$              36,262


$              40,306

Debt of consolidated variable interest entities, at fair value

80


87


92


95


98

Payable for investment securities purchased

701


1,901



302


1,279

Derivative liabilities, at fair value

80


117


326


99


1,221

Dividends payable

109


103


101


100


92

Obligation to return securities borrowed under reverse repurchase
agreements, at fair value

9,022


7,970


8,869


6,534


7,469

Accounts payable and other liabilities

442


433


547


486


837

Total liabilities

62,541


52,640


58,319


43,878


51,302

Stockholders' equity:










Preferred Stock - aggregate liquidation preference of $1,688, $1,688,
$1,688, $1,688 and $1,688, respectively

1,634


1,634


1,634


1,634


1,634

Common stock - $0.01 par value; 648.0, 603.3, 592.5, 574.6 and
551.3 shares issued and outstanding, respectively

6


6


6


6


6

Additional paid-in capital

14,901


14,466


14,356


14,186


13,999

Retained deficit

(8,283)


(7,633)


(7,674)


(7,284)


(7,610)

Accumulated other comprehensive loss

(808)


(595)


(530)


(672)


(807)

Total stockholders' equity

7,450


7,878


7,792


7,870


7,222

Total liabilities and stockholders' equity

$              69,991


$              60,518


$              66,111


$              51,748


$              58,524











Tangible net book value per common share 1

$                  8.08


$                  9.39


$                  9.41


$                  9.84


$                  9.08

 

AGNC INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)












Three Months Ended


September 30,
2023


June 30,
2023


March 31,
2023


December 31,
2022


September 30,
2022

Interest income:










Interest income

$                   593


$                   457


$                   351


$                   347


$                   373

Interest expense

646


526


449


322


196

Net interest income (expense)

(53)


(69)


(98)


25


177

Other gain (loss), net:










Realized loss on sale of investment securities, net

(534)


(255)


(81)


(1,068)

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FAQ

What was AGNC's comprehensive loss per common share for the third quarter of 2023?

AGNC reported a comprehensive loss per common share of $(1.02) for the third quarter of 2023.

What was AGNC's net spread and dollar roll income per common share for the third quarter of 2023?

AGNC reported a net spread and dollar roll income per common share of $0.65 for the third quarter of 2023, excluding estimated 'catch-up' premium amortization benefit.

What was the change in AGNC's tangible net book value per common share from the previous quarter?

AGNC's tangible net book value per common share decreased by $(1.31) or -14.0% from the previous quarter.

What was AGNC's economic return on tangible common equity for the third quarter of 2023?

AGNC's economic return on tangible common equity for the third quarter of 2023 was -10.1%.

How much dividends did AGNC declare per common share for the third quarter?

AGNC declared dividends of $0.36 per common share for the third quarter of 2023.

AGNC Investment Corp.

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